Troubled women’s apparel cataloger/retailer The Talbots has received a new $150 million secured revolving loan from majority shareholder Aeon despite being down 23% in net sales in its fourth quarter.
The company said in a press release on Apr. 13 that the new loan is on top of a previously announced $215 million that Aeon committed for working capital facilities.
Stuart Rose, managing director for Wellesley, MA-based investment bank Tully & Holland, thinks Aeon is trying to protect its prior investments. “Some might say Aeon is throwing good money after bad.”
But Bob Parker, group vice president of industry insights for retail analyst Global Retail Insights, says the $150 million lifeline may be a sign that Talbots is on life support.
“The working capital is probably a struggle for them, and they may need that $150 million to operate,” Parker says. “You need to look at the cash flow and determine how much an investment like that gives them. Can it get Talbots through six months or get them through a year?”
Talbots did $327.9 million in net sales for the quarter ended Feb. 2. It did $427.7 million in sales in the same period in 2007.
It ended its fiscal year down 12%, with $1.495 billion in net sales vs. $1.7 billion in 2007. Talbots’ net loss from continuing operations for 2008 was $145 million.
The merchant’s direct marketing sales were also down for the year, at $233.7 million vs. $262.7 million for the same period last year. Direct marketing sales for the fourth quarter were $49.2 million, compared to $66.5 million last year.
During the past fiscal year, Talbots has put its J. Jill brand—which it acquired in February 2006—on the market, and exited its Talbots Kids, Talbots Mens and Talbots U.K. operations.